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A  PROJECT REPORT

ON

WORLD TRADE ORGANISATION AND PROTECTION OF ENVIRONMENT

PROJECT SUBMITTED TO:

Mr. Azim Pathan Faculty of Environmental Law H.N.L.U

PROJECT SUBMITTED BY:

Palash Bakliwal 4th Semester  Roll no-87 B.A. LL.B. (Hons.) H.N.L.U

HIDAYATULLAH NATIONAL LAW UNIVERSITY, RAIPUR CHHATISGARH 1

World Trade Organisation and Protection of Environment

 

TABLE OF CONTENTS-

ACKNOWLEDGMENTS

3

OBJECTIVES

4

RESEARCH METHODOLOGY

5

INTRODUCTION

6

TRADE IMPLICATIONS OF CLIMATIC CHANGE

8

PROTECTION OF ENVIRONMENT AND TACKLE CLIMATE CHANGE WHILE MAINTAINING TRADE OPEN

9

ARTICLE XX OF GATT/WTO

10

PRODUCTION AND PROCESS METHOD

14

GOVERNMENT SUBSIDIES AND OTHER ENVIRONMENTAL PROVISIONS

16

CONCLUSION

18

REFERENCES

21

2

World Trade Organisation and Protection of Environment

 

ACKNOWLEDGEMENTS-

I would like to take this opportunity to express my deep sense of gratitude towards my course teacher, Mr. Azim Pathan for giving me constant guidance and encouragement throughout the course of the project. I would also like to thank the University for providing me the internet and library facilities which were indispensable for getting relevant content on the subject, as well as subscriptions to online databases and journals, which were instrumental in writing relevant text.

Palash Bakliwal 4th Semester

3

World Trade Organisation and Protection of Environment

 

OBJECTIVES-

The main objectives of this project are1.  To study the trade implication of climatic change. 2.  To study the protection of the Environment and tackle climate change while maintaining trade open 3.  To understand Article XX of GATT/WTO. 4.  To know the production and process methods of different products. 5.  To study the Government Subsidies and other Environmental provisions

4

World Trade Organisation and Protection of Environment

 

RESEARCH METHODOLOGY:

This research paper is descriptive & analytical in approach. It is largely based on secondary & electronic sources. Books & other reference as guided by faculty of Environmental law are  primarily helpful for the completion of this project. 

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World Trade Organisation and Protection of Environment

 

1.  INTRODUCTION-

In these we would be showing the Interrelation between WTO and Environment. A growing number of developing countries look to trade and investment as a central part of their strategies for development, and trade considerations are increasingly important in shaping economic policy in all countries, developed as well as developing. At the same time, however, most of the world‟s environmental indicators have been steadily deteriorating, steadily  deteriorating, and the global achievement of such important objectives as the Millennium Development Goals remains very much in doubt. These trends are not isolated; they are fundamentally related. Much environmental damage is due to the increased scale of global economic activity. International trade constitutes a growing portion of that growing scale, making it increasingly important as a driver of environmental change. As economic globalization proceeds and the global nature of many environmental problems becomes more evident, there is bound to be friction between the multilateral systems of law governing both. As the integration of trade and environment is inevitable in practice, a proper framework within the WTO mechanism 1

itself is essential to strike a balance between the two. The contention of critics of the WTO  is that the Organization is inadequate for the purposes of protecting the environment. This is not so. The WTO gives great latitude to members to restrict trade to protect the environment. This is rarely conceded. There are several provisions in the WTO agreements dealing with environment. There is a reference to sustainable development as one of the general objectives to be served by the WTO in the Marrakech M arrakech Agreement which established the W WTO. TO. There are  provisions in the Agreement on Agriculture and the General Agreement A greement on Trade in Services (GATS). However by far and away the most important provisions as far as environmental issues are concerned are Article XX of the GATT and the Agreements on Sanitary and Phytosanitary Measures and the Agreement on Technical Barriers to Trade. However existence of uncertainties, ambiguities and conflict situation between WTO and environment is not denied. There are certain grey areas which require attention and they had been subject matter of debate between countries at international negotiations and before the WTO dispute settlement body. Conflict of relationship exist between Multilateral Environmental Agreements (MEAs) and WTO. Relationship between the two is still to be clarified. Such a conflict creates legal insecurity and is injurious to the world trading system. WTO though 1

  The main critics of the WTO are a vast array of environmental, conservation and public policy NGOs and

organizations such as Public Citizen, Greenpeace, One World, World Wildlife Fund, Friends of the Earth, Sierra Club to name a few. fe w. 

6

World Trade Organisation and Protection of Environment

 

specifically meant for trade and not for managing environment has no option but to realize its international public policy objective. Provisions within the covered Agreements pertaining to environment normally provided in the form of exceptions are itself suffering from interpretation problems, which is clearly evident from various disputes before the WTO dispute settlement mechanism. Review of cases in which panel and appellate body ruled on environmental matters suggests that current legal instruments are not sufficient for environmental concerns. Article XX of GATT affirms the legal right of WTO Members to adopt measures that address environmental issues ; WTO is yet to come out clearly on

such environmental obligations.2The WTO's Committee on Trade and the Environment (CTE), for its part, has provided a valuable forum for discussions on reconciling environmental and WTO treaty obligations and other crossover issues. However, it has not  produced concrete proposals for trade policy reform to enforce or promote environmental goals. Optimal policy is to have an appropriate environmental policy in place, to look after the environment, and then to pursue free trade to reap the gains from trade. There are  pragmatic steps that the international community is required to take to more intelligently ameliorate trade-induced environmental degradation and to better balance free trade with ecological protection. The links between trade and the environment are multiple, complex and important. Trade liberalization is of itself neither necessarily good nor bad for the environment. Its effects on the environment in fact depend on the extent to which environment and trade goals can be made complementary and mutually supportive. A  positive outcome requires appropriate supporting economic economic and environmental policies.

2

 To an extent Asbestos extent Asbestos case, Gasoline case,affect case, and shrimp and shrimp case, the ifrulings have confirmed that countries enact environmental measures, even if they trade and even they concern others' Processes and can Production Methods. 

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World Trade Organisation and Protection of Environment

 

2.  TRADE IMPLICATIONS OF CLIMATE CHANGE-

There are no rules in the WTO specific to climate change. However, the WTO “tool box” of   of   rules can apply. The WTO provides a legal framework ensuring predictability, transparency and the fair implementation of such measures. Climate change has an impact on various sectors of the economy. Agriculture, forestry, fisheries and tourism are affected by climate change through temperature increases, droughts, water scarcity, coastal degradation, and changes in snow cover. These are key sectors in international trade especially for developing countries which have a comparative advantage on the international trading scene. Extreme weather can also affect ports, roads, airports and railways. Climate change can disturb supply and distribution chains, potentially raising the cost of international trade. Trade itself can also have an impact, positive or negative, on CO2 emissions. Economic development linked to trade opening could imply a greater use of energy leading to higher levels of CO2 emissions. However, trade opening has much to contribute to the fight against climate change by improving production methods, making environmentally friendly products more accessible at lower costs, allowing for a more efficient allocation of resources, raising standards of living leading populations to demand a cleaner environment and by spreading environmentally friendly technologies. In addition, about 90% of trade is carried out through maritime transport, which is the lowest contributor to CO2 emissions. It represents less than 12% of the transport sector's contribution to CO2 emissions, while road transport represents about 73%. Trade can help countries to adapt to climate change. When countries are faced with food shortages brought about by climate change, trade can play the role of a transmission belt between supply and demand. In the last decade, countries have designed new policies to address climate change. They range from standards to subsidies, from tradable permits to taxes. In doing so, governments have to find the right balance between designing a policy that would impose minimal costs for the economy while effectively addressing climate change. The industrial sector's growing concern is to remain competitive while climate mitigation efforts proceed. Today, some governments may be considering the use of trade measures in the fight against climate change. Border measures may be envisaged to imported products based on their carbon footprint. Several countries have raised this issue within the United Nations Framework Convention on Climate Change (UNFCCC) negotiations. 8

World Trade Organisation and Protection of Environment

 

The details of how that footprint would be calculated in an increasingly globalised market, where products are manufactured in a number of different countries is also part of the debate. Global problems like climate change require global solutions which must be based on the well-known environmental principle of "common but differentiated responsibility"  –   which means taking into account different level of responsibility in emissions .  3.  PROTECTION OF ENVIRONMENT AND TACKLE CLIMATE CHANGE WHILE MAINTAINING TRADE OPENRules made by WTO provide significant scope to protect the Environment and tackle climate

change while maintaining trade open  like. In the preamble to the Marrakech Agreement that established the WTO, sustainable development, and the protection and preservation of the environment are recognised as fundamental goals of the organization. The WTO promotes more open trade with a view to achieving sustainable development. It provides WTO members with the flexibility they need to pursue environmental and health objectives. A distinction should be made  between trade measures measures with a genuine environmental environmental goal, and measures that are intended as disguised restrictions and are applied in an unjustifiable and arbitrary manner. Spe pecif cif ic condi ti ons wher wher e tr ade r estr icti ons are allowed  - 

The WTO is not an environment agency. The main objective of the WTO is to foster international trade and open markets but WTO rules permit members to take trade restricting measures to protect their environment under specific conditions. Two fundamental principles govern international trade: national treatment and the most favoured nation (MFN). National treatme treatment  nt   means any policy measure taken by a member should apply in   the same

way whether the good is imported and produced domestically. Provided   they are similar  products imports should not be treated less favourably than domestic  domestic goods. be   applied in a The M F N principle  principle   means that any trade measure taken by a member should be  non-discriminatory manner across to all countries. The WTO rule book permits governments to restrict trade when the objective is protecting the environment. The legality of such restrictive measures depends on a number of conditions including whether they constitute justifiable discrimination. These measures should not constitute disguised protectionism. In the preamble of the Marrakech Agreement, which established the WTO, sustainable development, the protection and preservation of the environment are recognised as fundamental goals of the WTO. Article XX of the GATT (General Agreement on Trade and Tariffs) lists exceptions to open trade, among them the protection of the environment. WTO 9

World Trade Organisation and Protection of Environment

 

 jurisprudence has regularly reaffirmed members' right to determine their own environmental objectives. While there may be conflicts between international trade and the protection of the environment, WTO agreements permit exceptions to trade principles. Every member is free to determine its appropriate level of protection but must do so in a coherent manner. If a country bans the importation of asbestos from another, for example, it must ban asbestos imports from all countries, as well as banning domestic sales. Countries may also use technical environmental standards or sanitary and phytosanitary measures when pursuing their environmental objectives. They may, for instance, impose labelling requirements on a certain category of products. These technical standards could constitute an unfair obstacle to trade if they are applied in a manner which is discriminatory or if they create unnecessary obstacles to trade. The WTO encourages governments to apply international standards where they exist. It is essential for WTO members to be informed of changes in national policies and to examine whether they are justified. Any draft technical or sanitary standard should be notified to the WTO. There is a wider range of WTO rules relevant to climate change. Rules on subsidies may apply as countries are currently financing the development of environmental friendly technologies and renewable energy. Intellectual property rules could also be relevant in the context of the development and transfer of climate-friendly technologies and know-how. With growing of number of Environmental problems several provisions are included in the WTO agreement which deals with environment. There is a reference to sustainable development as one of the general objectives to be served by the WTO in the Marrakech Agreement which established the WTO. There are provisions in the Agreement on Agriculture and the General Agreement on Trade in Services (GATS). However by far and away the most important provisions as far as environmental issues are concerned are Article XX of the GATT and the Agreements on Sanitary and Phytosanitary Measures and the Agreement on Technical Barriers to Trade.

4.  ARTICLE XX OF THE GATT-

The core agreement of the WTO system is the General Agreement on Tariffs and Trade (GATT). The principal purpose of the GATT was to oblige members to use the same rules to regulate trade and to ensure in particular that there was no discrimination in trade. All international agreements need exemptions clauses. These are the mechanisms that ensure that governments retain the capacity to perform essential functions that might be eroded if the 10

World Trade Organisation and Protection of Environment

 

 basic rules of the treaty are applied. The most common exemption ex emption in most agreements is to  preserve freedom of action to protect national security. Article XX specifies what activities are exempt from GATT rules. These exemptions give members very wide latitude to control trade to protect the environment. Article XX waives members of the obligation to apply fundamental commitments,  particularly non-discrimination, in certain cases. They include protection of national security, protection of morals, and preservation of national cultural heritage . Of  particular importance is the right to waive the rules in order to protect human, animal, plant health and safety. Article XX (b) permits restrictions on trade to protect human, animal and plant life health and safety. Article XX (d) permits restrictions on matters not consistent with the objectives of the GATT. Article XX (g) also permits restrictions if they complement national programs for conservation of resources. This is the basis upon which health and quarantine restrictions are applied to trade in pharmaceuticals, hazardous products, toxic products and products carrying risk of disease, for example. The capacity of governments to prevent the entry of such  products into their national territory in this way enables governments to maintain the integrity of national environmental programs in the vast majority of cases. Of necessity, exemptions clauses must be limited. If they are too wide, they undermine the effect of the principal  provisions of the Treaty. Article XX is limited to a few areas. Members are also bound to utilize the exemptions only to the extent that it is necessary and are obliged to ensure they are not disguised restrictions on trade. The provision relating to conservation of natural resources [Article XX (g)] appears not to have been drafted with living natural resources in mind; however GATT/WTO panels have 3

stated that it is reasonable that it should be so interpreted.   Experience with use of Article XX of the GATT over many years revealed weaknesses in some provisions, particularly where the latitude to act was so wide that governments used the  provisions to secure economic protection. Actions were taken to reduce the amount of discretion governments had to restrict trade. tr ade. Many countries used the quarantine provisions to secure economic protection rather than to protect health and safety. The SPS Agreement was

3

  This was stated in the second Tuna/Dolphin panel report, although that report was never adopted and it was

restated in the Shrimp/Turtle panel report. United States  –   Import Prohibition of Certain Shrimp and   Shrimp  Products WT/DS58/AB/R. 12 October 1998.  1998. 

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World Trade Organisation and Protection of Environment

 

negotiated in the Uruguay Round 4  to contain such abuse. It states that if countries base restrictions on trade on recognized international standards, 5  the restrictions are deemed as complying with the agreement. Countries could apply other standards, but they were subject to challenge by other WTO members to demonstrate that they were based on science and supported by a risk assessment process. 6 The development of the SPS Agreement coincided with a global trend to shift away from dealing with risk on a “no“no -risk” basis to “risk management”. The latter approach leads to  to   better use of resources and better enjoyment of  benefits. The requirement that decisions be based on scie science nce and a process of risk assessment introduced transparency into decision-making by creating a visible check on abuse of executive discretion. This not only protected the rights of members of the WTO, it also gave assurance to consumers that governments were not abusing their powers. The Agreement on Technical Barriers to Trade (TBT) was negotiated in the Uruguay Round, replacing the Standards Code.7  It was designed to reduce the scope for countries to use technical standards as disguised barriers to trade. It obliges members to ensure that national treatment and non-discrimination apply when technical standards are adopted as mandatory regulations. 8Technical standards with restrictive trade effects are permitted for four “legitimate p “legitimate  purposes”, urposes”, (including standards developed for the protection of the environment, for national security requirements, for the prevention of deceptive practices and for the  protection of human health and safety and animal and plant health and life), provided the effect is not more restrictive than necessary to meet one of those objectives, taking into account the risk of non-fulfillment. In assessing that risk, the agreement stipulates that relevant elements of consideration are, inter alia, available scientific and technical information, related processing technology or intended end uses of products. 9  Members are also required to base their standards on those developed by international bodies which are 4

 Preventing abuse –  abuse  –  the  the role of the Agreement on Sanitary and Phytosanitary Measures (SPS). The Uruguay  Round of Trade Negotiations, 1986-1994 5

Specifically those set by the International Office of Epizooty (which sets veterinary and animal health

 standards), the International Plant Protection Convention (which sets standards for plant health and science and Codex Alimentarius (a joint organization of the FAO FA O and WHO which sets standards for human health) 6

 See Articles 2.2, 3.3 and 5

7

 The Standards Code of 1979 was developed in the Tokyo Round of trade negotiations.

8 9

 Article 2.1   Articles 2.2 12

World Trade Organisation and Protection of Environment

 

 presumed to be in compliance with the Agreement.10 In other cases, and where measures me asures have a significant impact on trade, parties are obliged to notify the measure and provide opportunities to other WTO members to comment. Sound regulation, standards and ecolabeling. Making decisions transparent and setting objective criteria by which they could be challenged as provided or in the SPS and TBT Agreements is consistent with the doctrine that regulations should be imposed by governments only to protect health and safety. When Governments regulate for other reasons, they interfere in the market and exercise influence which favours some parties in the economy and damages others. There is large body of standards which aim to improve the quality of goods and services and provide information to consumers. Most of these are national standards and are set by national standard setting organizations. A set of international standards is produced by the International Standards Organization. Well-known quality standards developed by that organization include the ISO 9000 series (to improve quality in organizations) and ISO 14000 (to set quality standards to improve environmental management.). These are voluntary standards and in most countries are developed by private organizations. When Governments adopt these standards and make compliance compulsory, they become official regulations.11  If a company requires suppliers to comply with specified standards struck by national standards organizations or ISO, this does not constitute a trade barrier. It is a commercial requirement. However when a government stipulates that unless such standards are complied with imports or exports are not permitted, these are trade restrictions that must comply with WTO rules, including the provisions of the SPS and TBT Agreements. Where eco-labelling systems are not mandated by governments, but are applied by commercial entities for the information of consumers, these are voluntary standards and WTO provisions 12

do not apply.   When an eco-label is mandated under government regulation, then the regulation needs to comply with the provisions of the WTO. As shown in the foregoing, the 10

 Article 2.4

11

 The WTO Agreement on Technical Barriers to trade differentiates between standards with which compliance

is mandatory, termed “technical regulations” and standards with which compliance is not mandatory, termed “standards”.   “standards”. 12

The Code of Good Practice under the TBT Agreement applies to voluntary standardising bodies and voluntary

standards. There is no legal obligation on these bodies to comply with the Code, however there is an obligation on the central government standardising body take all “reasonable measures” to ensure they accept and comply with the Code. (Article 4 and Annex 3)

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World Trade Organisation and Protection of Environment

 

terms of Article XX and of the SPS and TBT agreements make ample provision for use of eco-labels.

5.  PRODUCTION AND PROCESS METHODS-

A complaint about the WTO provisions is that trade restrictions on how a product is produced or processed are not permitted. The general point was that the WTO did not permit one member to restrict trade with another on the basis that they did not apply policies which the first party preferred. The environmental case is that if one method of processing (such as a method of fishing for tuna) causes environmental damage (high levels of incidental kill of dolphin) then an importer should be able to express preference for the product (tuna) processed in a way that does not cause environmental damage (caught using fishing methods that reduced the incidental kill of dolphin).13  WTO provisions generally do not allow trade to be restricted on those grounds. The TBT Agreement recognizes “related processing technology” as a relevant consideration for   for   applying a mandatory technical standard to protect the environment. However this is a limited application and the extent of its meaning has not been tested. The general case for not making provision in the WTO for the right to restrict an import according to the environmental effect of the way in which it was processed or produced is that to do so assume the WTO should include provisions to secure public policy objectives other than trade. There is a difference between allowing exceptions to protect national policies and creating provisions which enable governments to force other to adopt non-trade objectives. It is argued that the purpose of the WTO is to enable countries to gain the benefits of an open trading system. If it is to be used as an instrument to achieve environmental purposes, the case in principle is made for it to be used to secure objectives in other areas of international  public policy such as health, labor standards, postal services, human rights and air transport standards. If this were to happen, the WTO would cease to be effective in meeting its primary  purpose, not just because it would be overloaded with policy objectives which have not intrinsic functional relationship to trade, but because giving members of the WTO the right to  pick and choose specific areas in which they could insist on certain standards being met  before trade was permitted would undermine the capacity of the WTO to allow members to exploit comparative advantage. The case to alter the WTO to permit trade restrictions on 13

 st 

 Centre for International Environmental Law and Greenpeace International, Safe Trade in the 21  Century  Century –   –    A Greenpeace Briefing Kit, September 1999, www.greeenpeace.org www.greeenpeace.org accessed August 2001 . 

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environment grounds is loaded anyway. Those who make that claim are obliged first to explain why more normal means of achieving international agreement to meet international  public policy objectives are not used. The United Nations Conference on Environment and Development (UNCED) in 1994 laid down some principles on trade and environment.14 They stated that the preferred international approach to protecting the environment was to create multilateral agreements expressly for that purpose in which members would agree to adopt commonly agreed measures in their national law or practice. They also stated that use of trade measures to protect the environment should be avoided. To apply this approach in the case of the tuna/dolphin issue, rather than have one country threaten a trade sanction unless another complied with its preferred environmental (fishing) policy (as was the US position) to achieve international environmental protection, all countries fishing in the region would enter an international agreement to required their fishing fleets to use the same fishing techniques, as they now do in a regional fishing agreement. 15  The proponents of the sanction approach would argue that were it not for the coercion, the regional agreement would not have been adopted. This may be so, but this is to justify the morally-odious and internationally-censured option of applying coercion because it disregards the national sovereignty of nations simply on the grounds that the more normal approach of seeking an international agreement is too slow. In the case of the effect of dolphin in the Eastern Tropical Pacific region, there was no case for urgency. The species concerned were not endangered. Therefore, members of WTO aimed at protecting the environment, subject to certain specified conditions included in various WTO agreements. Some of these measures are as under: (i) Article XX of the General Agreement on Tariffs and Trade Trade (GATT), 1994 permits WTO Members to depart from their GATT obligations for legitimate national policy objectives. These objectives include: (a) Article XX (b): Measures to protect human, animal or plant life or health; and (b) Article XX (g): Conservation of exhaustible natural resources. (ii) The General Agreement on Trade in Services ( GATS) also contains an exception to GATT Article XX (b).

14

 See Annex The UNCED Trade and Environment Principles.

15

 The Agreement on International Dolphin Conservation Program 1999, Inter-American Tuna Commission  

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(iii) Article 27 of the Trade Related Intellectual Property Rights (TRIPS) Agreement states that “Members may  may  exclude from patentability inventions, the prevention  prevention   within their territory of the commercial exploitation of which is necessary… to protect human, animal or plant  life or health or to avoid serious prejudice to the  the  environment”. environment”.   (iv) Agreement on Subsidies and Countervailing Measures ( ASCM) contained an exemption for certain environmental subsidies (provision has since lapsed). (v) Agreement on Technical Barriers to Trade ( TBT Agreement) recognizes protection of the   environment as a legitimate objective and allows   Members to take necessary measures towards this end subject to meeting certain requirements.  (vi) Agreement on the Application of Sanitary and Phytosanitary Measures ( SPS Agreement) allows Members to use sanitary or phytosanitary measures to protect humans, plants and animals from contaminants, disease-carrying organisms, and pests. It elaborates rules for the application of the provisions of Article XX (b). (vii) The Preamble of the Agreement on Agriculture ( AOA) reiterates Members' commitment to reform agriculture in a manner that protects the environment. Under the agreement, domestic support measures with minimal impact on trade (known as “green box” measures) are allowed and are excluded from reduction commitments. Among them are expenditures under environmental programmes, provided that they meet certain conditions.

6.  GOVERNMENT SUBSIDIES SUBSIDIES AND OTHER ENVIRONMENTAL ENVIRONMENTAL PROVISIONS PROVISIONS -

In the Agreement on Agriculture, there is scope to permit subsidies which are for environmental protection. This was part of the Agreement on Agriculture which was negotiated in the Uruguay Round. Re-negotiation of that agreement has begun. The European Union has indicated that it wants general provisions to permit trade restrictions on environment grounds. Others, such as members of the Cairns Group coalition of agricultural exporters want to minimize the extent to which such measures can create new grounds for  protection of economic interests. There is a general recognition in the General Agreement on Trade in Services of sustainable development as an objective of the Agreement.

There is clear evidence around the world that payment of subsidies by Governments diminishes the regard in which users of resources hold them. Subsidies to farmers encourage overexploitation of land, subsidies of fertilizers encourage over use, for example causing excessive levels of nitrates in the water table in European Community farmlands, subsidies to 16

World Trade Organisation and Protection of Environment

 

forestry and fishery resources result in poor management, and in all these cases, there is environmental degradation. The WTO Agreement on Subsidies and Countervailing Measures restricts the extent to which governments can pay subsidies. It therefore creates a positive framework to foster sustainable management of resources. It does not apply to subsidies to agriculture which are covered by the Agreement on Agriculture. Much higher levels of subsidies are permitted in agriculture. There is a commitment by member of the WTO to negotiate further reductions.

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CONCLUSION-

The literature on the interface of trade and environment, as well as the evaluation of trade measures measur es within MEAs indicate that trade restrictions re strictions are not the only nor necessarily necessaril y the most effective policy instrument to ac hieve the environmental objective objecti ve of

the MEAs.

The root cause of environmentally

unsustainable

development is the

existence of market or regulatory regulato ry failures, failures , when the true value of environmental environmenta l resources or cost of polluting economic activities are not reflected reflect ed in market prices due to structural defects in the system or due to improper government policies.

CoCo -

operative environmental efforts as reflected by MEAs remain important to address transboundary and global environmental problems, and trade t rade measures can play an important role in some of these MEAs.

Indeed, India noted in an initial paper in 1996

to the CTE that, in dealing with only one element of an MEA, namely, the trade measure, we may be unconsciously encouraging dependence on trade measures to achieve environmental objectives, when we are all agreed that this is not the best way of handling environmental concerns . Given the rise in environmental consciousness and concerted efforts across the globe to tackle genuine environmental problems

(which defy

national jurisdictions)

through

MEAs, one cannot disregard trade obligations pursuant to such MEAs within the WTO especially especiall y when those directly relate to certain trade rules.

India has recognized the

 principle to support environmental initiatives and has been Party Part y to most major MEAs. At the same time, India India recognizes that gains from fair and free trade are important to support sustainable development at home. The current negotiations on para 31 (i) of the DMD need to be successfully successfull y arrive at an interpretative decision, since it is long overdue. Although the present provisions within the GATT/WTO allow for unilateral trade measures on environmental grounds, a new decision on the relationship between STOs pursuant to MEAs and rules of the multilateral system is essential to curb the trend in unilateralism. unilateralis m. The jurisprudence in a recent environmental-trade environmental -trade dispute ruling rul ing indicates that bilateral good faith efforts to protect the environment can make departure from free trade  justifiable, since the interpretation interpretat ion of the GATT Article XX provisions has been significantly significantl y broadened (e.g. Malaysia-US Malaysia -US Compliance Dispute on Shrimp-Turtle 2001). 2001).

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World Trade Organisation and Protection of Environment

 

Given the recognition of autonomy of a WTO Member in determining domestic environmental regulations (which can affect trade with Members), and the widening of interpretation interpretatio n of justifiable trade restrictions, restrictio ns, the multilateral trading system is at risk ri sk of protectionism.

By default any an y domestic environmental envir onmental regulation regulatio n would take into

consideration only its own environmental/ ecological and economic interests, with complete disregard to other countries. Yet, such local environmental considerations considerations are neither ecologically nor economically efficient. A WTO decision that supports specific trade obligations pursuant to MEAs (represented by large participation participatio n of countries from various regions and stages of development) is the only way to restrain unilateral unilateral measures that currently threaten multilateralism. The EC, the main demander of the environment agenda in the WTO, regards MEAs and WTO as holding equal legal status, even though the two distinct regimes defy such ranking. The broad agenda of the EC (supported by Switzerland and Norway), poses risk to the multilateralism it claims to uphold, since some MEAs allow Party discretion to undertake unilateral restrictive res trictive trade tr ade measures based on the Party s environmental prior ities or evaluation. Thus the broad agenda of EC carries a potential threat of regionalism/ unilateralism. There is also a risk of protectionism in the definition of individual terms within the current negotiations.

While it may seem that the WTO Members have engaged in semantics of

each term contained in Paragraph 31.1 of the DMD, the final

interpretation interpretati on

of

the

 provisions under the MEAs hinge on these definitions. Even supporters of the  broader agenda, like Japan, have acknowledged that the discretion provided in some MEAs make the definition of STOs difficult, and indeed a case-by-case case -by-case analysis may  be required for those MEAs. In this light, a restrictive restrictiv e definition of STOs as adopted by India is a sound approach, especially to check for the protectionist pitfalls of a broader definition. Finally, a structured MEA-by-MEA analysis is a judicious negotiating stand to clarify the relationship between of STOs pursuant to MEAs with WTO rules, since this would lead to a clear understanding of what kind of trade measures for environmental purposes are consistent under the WTO. It is important for India to work towards such a multilateral interpretative decision and understanding within the WTO. A conceptual understanding is

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 particularly  particularl y significant in the face of unilateral trade restrictions re strictions on environmental being sanctified in the post-WTO era. It is in the best interest of India to re-affirm re-af firm her commitment to promoting sustainable development along with trade liberalization, liberalizati on, as set out in the Preamble to the WTO Agreement and the

Decision

on Trade

and Environment), and continue

to

support

environmental initiatives initi atives through MEAs. M EAs. After all, the WTO is not an environmental  policy making body, and should continue to promote trade liberalization liberalizati on with due respect to multilateral multil ateral environmental envir onmental consensus coming from organizations or ganizations specializing speciali zing in those issues.

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BIBLIOGRAPHY-

 NEWSPAPER ARTICLESARTICLES  Sawhney, Aparna, „Trade and Environment Negotiations at the WTO: The Interface of 

Multilateral Environmental Governance and Multilateral Trading System‟, GALT Update, The Energy and Resources Institute (TERI)‟, New Delhi, March 2007, Nanda, Nitya, „Trade and Environment: In Search of a Global Agenda‟, GALT Update, TERI, March 2007.

  Cheyne, Ilona, Risk and Precaution in World Trade Organization Law, Journal of World



Trade, October 2006, Vol. 40 Issue 5.

  Rachel, McCormick, „A Qualitative Analysis of the WTO‟s Role on Trade and  



Environment Issues‟, Global Environmental Politics, February 2006, Vol. 6 Issue 1  1  Kirchbach,

Friedrich

Von,

and

Mimouni,

Mondher

„An

Assessment

of

Environmentallyrelated Non-tariff Non-tariff Measures by Lionel Fontagn‟, World Economy, October 2005, Vol. 28 Issue 10.

  Uppal, Shaban. „The WTO and Environment‟, Economic Review, January 2005, Vol. 36  



Issue 1.

  Eckersley, Robyn, „The Big Chill: The WTO and Multilateral Environmental  



Agreements‟, Agreement s‟, Global Environmental Politics, May 2004, Vol. 4 Issue 2. 2.

BOOKS-

   Environment and Trade: A Handbook  Handbook , Second Edition, The United Nations Environment



  Programme Division of Technology, Industry and Economics Economics and Trade Unit



and the International Institute for Sustainable Development, Canada, 2005.

  Trade and environment: A resource book , ed. by Najam, Adil; Halle, Mark and Meléndez-



Ortiz, Ricardo, International Center for Trade and Sustainable Development, New York, 2007.

  Guru, Manjula and Rao, M.B., WTO Dispute Settlement and Developing Countries, Lexis



 Nexis Butterworth, 2004.

  Wardha, Harin, WTO and Third World Trade Challenges, Common Wealth, New Delhi,



2002.

  Bhandari, Surendra, World Trade Organisation and Developing Countries, Deep and Deep



Publications Pvt. Ltd., New Delhi, 1998.

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World Trade Organisation and Protection of Environment

 

ONLINE RESOURCES-

  CTE



documents

are

found

in

the

WTO‟s

trade

and

environment

official

http://www.wto.org/english/tratop_e/envir_e/cte_docs_list_e.htm

  Brack, D., The World Trade Organization and sustainable development: A guide to the



debate.. Energy, Environment and Development Programme (EEDP), Chatham House.  debate House.   London, U.K., 2005  2005 

  Charnovitz, S. “Exploring the Environmental Exceptions in GATT Article XX.” In  



 Journal of World Trade 25(5),1991

  Copeland, B. R. and Taylor, M.S. (2003) Trade and the Environment: Theory and  



 Evidence.. Princeton University Press. Princeton, USA.  Evidence

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World Trade Organisation and Protection of Environment

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